1. travel
2. tourist facilities
3. hotel

Sour milk sales
Ministers must wake up to a
deteriorating dairy crisis, says
Madeta boss Milan Teplý
face to face pages 10–11
Kurds battling IS
75
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9 771803 454314
Monday, 15 June 2015
Exclusive photoreportage
from our journalists
in Iraq and Syria
Photostory pages 12–13
Every year,
hundreds of
kilograms of gold
vanish from the
Czech National
Bank’s vaults. The
precious metal
is used to make
gold coins which
are offered by the
central bank to
the public
Not following
the gold brick road
Petra Pelantová
Continues on page 8
Photo: Hynek Glos
W
hen central banks
step forward to
explain shopping
sprees in which
they have spent billions of
dollars on boosting their gold
reserves, they generally talk
of two things: preparing the
national defences against the
next financial crisis and ensuring their reserves are equipped with enough “monetary
firepower”. Most central banks
not actually buying gold are,
meanwhile, at least bringing
their gold home from abroad
or, at the very minimum, they
are maintaining existing levels
of their holdings. But the Czech
National Bank [ČNB], which
is charged with managing the
Czech Republic’s gold reserves,
seems to be betting on an entirely different strategy. It has
been liquidating its gold stocks
for many years and continues
to do so. The ČNB’s game plan
is to use its gold to mint coins
for sale to the public.
2/3
news
TTIP ‘cheerleader’ arrives in town
Igor Záruba’s notebook
EC trade commissioner insists health and consumer protection will not suffer under EU/US trade treaty
Removing hurdles.
Czech businesspeople
and experts mostly concur:
overall, the TTIP would be
advantageous for the Czech
Republic
and US standards are of equal
strength, with perhaps only minor differences. The treaty will
not affect European standards
applicable to health or environmental protection or working
conditions,” Malmström added,
refuting some fears expressed
by treaty opponents.
Czech Prime Minister Bohuslav Sobotka gave assurances
that closer trade links with the
US would generate jobs and
business orders for Czech
companies. The government
has commissioned a study to
provide specific numbers when
it comes to the treaty’s impacts.
“The modelling operates according to three scenarios:
a minimalistic treaty extent,
one in which the EU succeeds
in negotiating everything member states have included in the
European Commission’s negotiation mandate, and a scenario
in which no deal is struck. The
EU would come a cropper if
the last scenario materialised,”
said Deputy Minister of Industry and Trade Vladimír Bärtl.
“It is important to pull down
non-tariff barriers that exist in
mutual trade as they complicate
matters primarily for small and
medium sized businesses. It is
therefore essential to listen to
businesses that have been involved in trading with the US
directly or indirectly,” added
Josef Bič, a researcher at the Faculty of International Relations
at the University of Economics
in Prague [VŠE]. Bič has contributed to Czech government
recommendations accepted by
the National Convention on the
European Union.
Czech businesspeople have
already identified industries
the TTIP would clearly boost,
including medical equipment,
engineering, measuring technology and aviation. The treaty
would also benefit the domestic
automotive industry and industries linked to it. If the TTIP
is approved, Czech manufacturers of public transport safety
technologies might also find
they have a new market across
the big pond.
Photo: Dušan Kütner
KDU-ČSL
boycotts travel
to Russia
Photo: Reuters
G
et more active in public discussions on the
planned EU/US trade
agreement, the Transatlantic
Trade and Investment Partnership (TTIP): that was the
message to Czech ministers delivered in Prague by European
Commissioner for Trade Cecilia
Malmström. The Czech capital
was the fifth stop on her tour
of EU countries undertaken to
explain what exactly the European bloc and Washington have
been negotiating.
“We aim to cut tariffs in mutual trade. For example, a Czech
manufacturer of lighting installations is currently asked to pay
an import tariff of 28 percent.
That is a lot of money and it
makes such products expensive
in the US,” said the commissioner, referring to one of the
key treaty constituents. Other
aspects of the proposed TTIP
include better access to public
orders in the US and two-way
recognition of certifications
and standards in areas where
the regulations of the EU and
US are in pursuit of the same
goals. “This particular collaboration will take place only
in areas where the European
David Vagadaj
The presidium of the Christian Democratic party (KDUČSL) and its MPs’ grouping
have agreed to boycott all
official travel to Russia until
the government in Moscow
ceases destabilising Ukraine.
Another reason cited for the
move is Russia’s published
list of 89 European politicians banned from treading on
Russian soil. A similar stance
towards the Kremlin has been
officially adopted by KDU-ČSL’s MEPs. Four Czech politicians, including ex-foreign
minister Karel Schwarzenberg, have been included in
Russia’s entry ban.
A rocking
good time x 2
The first part of the newstyle of Rock for People
attracted nearly 30,000 music
festivalgoers to its venue in
Hradec Králové. The open-air
festival has for the first time
been split in two. Its second
part will take place from
3 to 5 July in Pilsen as Rock
for People Europe, when
Motorhead will top the bill.
Among the stars at Part I were
Faith No More
Taboo talking shop
A victory to remember
Photo: ČTK
The short odds proved prescient as eight rowers of Prague’s Dukla rowing club notched up a 36th
victory in a row when winning the 102nd Primátorky [Mayor’s] Race on the Vltava. They beat off
the challenge of a combined crew made up of ČVK Brno, Boletice and Dukla rowers by 4.3 seconds
Big (and small) sales brother
will be watching you
Pavel Otto
The ruling coalition has unanimously agreed with the
introduction of the electronic
recording of sales, something
widely seen by publicans,
B&B owners and other small
merchants as an unwelcome
government scourge. Ministers are countering these
anxieties by assuring honest
traders that they have nothing
to fear. No amount of soothing
persuasion can, however, alter
the fact that a small business
will have to fork out between
CZK 20,000 and CZK 30,000
extra for the required electronic cash register, printer, internet connection, training and
accounting services.
Finance Minister Andrej Babiš (ANO) said he believed the
new measure could improve tax
collection by as much as CZK
12bn annually. On the other
hand, it is expected to take a
while before the new system is
fully functional. The creation of
a giant data centre that could
begin collecting huge amounts
of data as soon as mid-2016 will
cost an estimated CZK 300m.
Additional hundreds of millions of crowns will be spent on
operating the data centre. The
state will collect information on
all sales, whether paid in cash or
with a credit or debit card.
“Following the law on the
authentication of the origins of
assets, the electronic recording
A man in a tin foil hat
corners you in a dark alley.
He whispers of a secretive
meeting of the powers that
be. You might think he
deserves derision. You’d be
wrong (except for the hat).
Welcome to the world of the
secretive Bilderberg Group,
an annual business, media,
and government forum
created to enable discussions about something (just
don’t ask what...). This year,
the you-know-who meet at
Interalpen Hotel Tyrol near
Telfs, Austria. AXA insurance
CEO Henri de Castries is the
host. Much like Fight Club,
rule no. 1 is: you do not
talk about Bilderberg club.
It seems that these wise
wizards spend their time
conjuring up Bilderberg medicine for whatever global
ailment they think merits
attention. Official subjects
include security, defence,
economics and globalisation. Some refuse the invite,
others leak details of the
encounter. And these days,
the “secret” summit sparks
rather non-secretive public
demos. Opponents fret over
self-important elites settling
policy matters outside standard democracy. But talk
of a conspiratorial shadow
government is overblown.
Officially, Bilderberg is
just a talking shop. So any
thoughts that its assembled
will find a definitive fix for
the Greece debt standoff are
entirely without merit.
Jaroslav Bukovský’s notebook
Inflation finds its legs
Photo: Tomáš Novák
Foreign trade
Jan Stuchlík
Every beer counts. The planned data centre will collect huge
amounts of data every day
of sales is the next important instrument in reducing tax evasion,” said PM Bohuslav Sobotka
(Social Democrat). The government, meanwhile, has listened
to lobbying from the catering
industry. In response, it is to
reduce its applicable VAT rate
from 21 percent to 15 percent. In
addition, all income tax payers
who are natural persons and will
be affected by the new measure
will also receive a one-off dis-
count of CZK 5,000 from their
income tax. The Chamber of
Commerce of the Czech Republic demanded the postponing of
electronic sales registration by
half a year to give entrepreneurs
more time to prepare. Critics of
the law behind the move claim
that small firms will be pushed
out of business by their bigger
counterparts, such as chain stores, which are to benefit from
exemptions.
In recent weeks, Europe
passed a crucial transformational milestone – all without
drawing much attention
to the achievement. While
newspapers and websites
focused on the tense negotiations between Greece and
its creditors, something far
more significant occurred
that had nothing to do with
words such as “Grexit” or
“default”. Very quietly, Europe flipped its forecasts from
deflation towards inflation.
This change, long predicted
by central bankers, is finally
upon us. The main eviden-
ce for such a conclusion is
that major financial market
players have begun to shun
the purchasing of European
countries’ debt bonds, including Berlin’s negative-yield
issues. The moves signal that
low interest rates finally appear to be on their way out;
inflation, too, may soon become a real, rather than almost
forgotten force. Now all that
remains is for such rates to
settle within levels amenable
to Europe’s economies – and
for those steering the bloc’s
economic policies to know
what they’re doing.
E15 weekly, economic and business newsmagazine | www.e15.cz |
Tomáš Skřivánek, Euro E15 Division Director | Igor Záruba, Executive Editor,
[email protected]; Marian Hronek, Editor, [email protected] | Contacts: Zuzana Faltová,
Secretary | Call (+420) 225 276 461, | Postal address: Mezi Vodami 1952/9, 143 00
Praha 4 – Modřany | Published by Mladá fronta a. s., Mezi Vodami 1952/9, 143 00
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4/5
business & markets
Lime&Tonic in a nutshell
Founded in February 2011,
it offers experiences and gastro services across
5 continents
(apart from its Prague and London branches,
it has opened units in Dubai and Sydney), and it has:
Digital social concierge races to find new financing
investment
Tereza Zavadilová
T
he startup revolution,
which in recent years
has swept across the
Czech Republic, has started to
abandon some of its children.
The short-lived business of one
of the most highly appraised
innovative ventures, digital
social concierge service Lime&Tonic, is in jeopardy. In
the latest business statement
provided to investors, the
company has conceded it is in
deep financial difficulties, is
attempting to sell off part of
its assets and has been unable
to pay wages since last November. The Prague office of the
curated experiences platform
has lately stopped providing
services and last Tuesday Lime&Tonic acknowledged that
given its operating losses it was
seeking additional financing.
It requested that clients stay
patient for two months.
The company management
has declared that it does not
intend to give up the fight for
survival. “We have a plan for
how to secure further funding.
We consider it to be the best
approach for our clients and
merchants,” the management
said in a statement provided
to E15 daily.
Lime&Tonic was until last
year extremely successful in
raising capital. The firm was
selected in two rounds of angel
investment funding to receive
almost three million euros,
while last year saw it source
more than GBP 100,000 from
retail investors following an
equity crowdfunding campaign rolled out on the Seedrs.
com platform. Among shareholders in the global smash
hit business founded in Prague are a number of leading
venture capital names, with
the most well-known perhaps
being that of London-based
American entrepreneur and
investor Julie Meyer, who has
many prosperous technology
projects behind her.
Lime&Tonic’s 2014 revenues reached around EUR
2m. Throughout its existence,
the company has never moved
out of the operating red. However, since it was founded four
years ago, the enterprise has
won many nominations and
awards in the digital business
field. Its smartphone platform
was in Great Britain ranked
among the 10 best applications
in the Mobile Business of the
Year category of the Smarta
100 awards. The mobile app
was developed by Czech apps
and software development firm
Adikt Mobile of the Kindred
Group, with the fee linked to
future commissions.
170,000 240 partners
clients
including Mandarin Oriental,
Four Seasons and InterContinental
106,000 pounds
sterling sourced from retail investors
2.9 million euros
2 million euros
awarded by angel investors
in projected 2014 revenues, but expectations
of another negative operating result
Star-name shareholders and enterprise
consultants including investor personalities such as
Julie meyer (ex-Ariadne Capital),
Cem sertoglu (Earlybird) and Daniel Lynch (3TS)
A century later,
Baťa’s back in real estate
Harrachovský
palác.
The investment
into revamping
this historical
protected
building will
exceed one
hundred million
crowns
Daniel Novák
Legendary footwear company
Baťa has been enticed into an
additional business sphere – it
is pursuing real estate development, just as did around
a century ago during the First
Czechoslovak Republic. Jindřišská street in Prague 1 is
the site of the firm’s first newera venture in the property
field. The reconstruction of
the baroque Harrachovský palác will create a premises for
a series of new shops as well as
office space. The investment
in revamping the protected
historical building will exceed
CZK 100m.
“This amounts to the first
development project of its
kind [for us],” Viktor Šimeček, who manages the real
estate division of the Baťa
group, told E15 daily. But
up and down
Photo: archive
Lime & Tonic
fighting for its life
the Jindřišská project may
very well not be the last of
its kind undertaken by Baťa.
“We have other projects in
our sights, although a related agreement signed by the
company prevents us for now
from disclosing the locality,”
he added. Baťa can already
boast of experience in completing reconstructions. It
has previously overhauled
several large Baťa store premises, for instance in Wenceslas Square in the capital,
in Brno’s Česká street and
in Ostrava’s central square,
Masarykovo náměstí.
Martin Blaškovič
CEO, Zetor Tractors
The Brno producer achieved its best
market share in the Czech Republic for
six years. On the domestic market, it now
stands at number one.
Pavel Pilát
General Director, Metrostav
He has left the board of the biggest Czech
construction firm. This could be connected
with the fact that he figures on the list of
accused in the affair surrounding former
Central Bohemia governor David Rath.
Pavel Krtek
Board Chairman, Czech Railways
The national rail operator has issued more
than three million crowns’ worth of bonds.
While it previously used borrowings largely for the purchase of new trains, it is now
raising debt to refinance old debts.
a dv e r t i s i n g
A151005034
PPF dousing
difficulties in Russia
Vladan Gallistl
Get me a piece of the hotel
Photo: Reuters
Prague Stock Exchange investors might do a double take when they notice Karlovy Vary’s Imperial
Hotel moving up and down on the stock market, but their eyes will not be deceiving them. The
unlikely newcomer on the exchange’s secondary market has been put there by investment fund
Imperial nemovitostní. It owns the famous hotel plus several other guest establishments in the centre
of the West Bohemian spa city. The fund has issued more than 3,500 shares of stock that have been
trading since the beginning of June on the bourse floor
Only two years ago Russia was
seen as the promised land by
PPF Group, the privately held
international financial group
of richest Czech Petr Kellner.
But the situation is not so rosy
now. Two of PPF’s real estate
projects – a shopping mall in
Ryazan, 200 kilometres southeast of Moscow, and the
Comcity office park in a new
district of the Russian capital
– have in their financial results
reports for last year disclosed negotiations on changes
in their loan agreement conditions.
“In the case of Comcity, the
PPF Group is close to signing
a new agreement on a guarantee reflecting the completion of
the construction phase. Under
this, new credit conditions will
be observed,” read a release
from PPF. According to a spokesman for the group, Radek
Stavěl, the new conditions
related to Comcity have been
negotiated and signed off.
Comcity very much remains
an investment boasted about by
PPF, for which it is the biggest
real estate project in Russia.
The complex covers 430,000
square metres. It is the result of
an investment approaching one
billion euros. In March, after
several years of talks, Comcity
was able to announce Russian
telecoms giant Rostelekom as
a new big tenant. Russian media said it would lease 58,500
sqm at the office park. The value of its 15-year contract with
Comcity has been estimated at
EUR 269m.
Originally, Rostelekom planned to lease 90,000 sqm for
the 15-year period, Russian
business daily Kommersant
reported. But it is said that in
2013 it opted for a more modest space. Other tenant firms
at Comcity include information
technology company Sistematika and Oracle.
„Send your company‘s money to take
a rest and they return to you multiplied“
We guarantee a certain yield with term
deposits Artesa BONUS 2,85 % p. a.
Time-limited possibility of obtaining an advantageous interest
Higher and guaranteed interest rates compared to the banks
The possibility to select up to 50 % of deposits
www.artesa.cz
DO NOT
DISTURB,
your
corporate
money are
propagating
here
6/7
opinion
PM makes hay out
of Chládek exit
Jana Havligerová’s political diary
Action (and harassment)
not words
I
t is too early to evaluate
the efficacy of a pending
leadership change at education ministry. However, the
political contours involved in
the first substitution of a Social
Democratic minister in this government are clear. The winner
is PM Bohuslav Sobotka; the
vanquished is President Miloš
Zeman.
Just recently, when Sobotka
recommended Marcel Chládek
resign, the outgoing education
minister was still insisting he
would not cave in to pressure
me. After a Castle talk with
Zeman, Chládek told reporters the president did not want
to dismiss him, and had even
been won over by him. A remarkable indiscretion, which
he should, by all rights, have
kept to himself.
A mere three months ago,
Zeman, in an unguarded Prima
TV hot-mike moment, griped to
his foreign affairs office head
that the 1 March resignation
of Justice Minister Helena
Válková occurred because she
“shat herself”. Zeman planned
to drag his feet over accepting
her resignation to “demonstrate strength”. Surprisingly, Válková had no interest in playing
along. This time, no such unguarded moments were required.
The PM could have ousted Chládek for
many of his curious policy ideas, starting
with providing primary schoolers with
tablets and culminating in affixing chips to
pupils. But that would mean accepting some
of the blame for the failure
from Andrej Babiš. The resoluteness proved paper thin.
Ultimately Chládek decided
to go quietly. Perhaps he meant that even after his departure he would not give up his
fierce battles regarding public monies over which Babiš
holds sway. It is a pledge also
taken up by Chládek’s likely
successor Kateřina Valachová.
Of course, any incoming education minister will promise
to do something to improve
teachers’ pay. But the degree
of the subsequent fulfilment is
another matter entirely.
This way, the result is far
more elegant. As far back as
a year ago, Sobotka raised the
issue of Chládek’s behaviour
towards subordinates. Evidently to no avail; and so the
second time round the axe fell.
End of story. The fact that in
all likelihood Sobotka will successfully appoint a woman to
lead education is a very welcome bonus, certain to chalk up
a few extra points for him.
Conversely, it is none other
than President Zeman who is
once again licking his wounds.
And Chládek is chiefly to bla-
Chládek went straight to the
media and said Zeman was prepared to resist his resignation.
A picture is painted of an isolated president desperately seeking to inject himself into some
meaningful power-play. Given
our president’s limited constitutional powers, such games
require accomplices. Zeman
is evidently coming unstuck –
no-one seems to want to join
in. The head of state’s image is
now truly pitiful. If there’s room
on Zeman’s proverbial payback
list, Chládek should surely be
given an honoured place.
Petra Fenclová, owner
of a Domažlice-based
jewellery store, took issue
on Czech Television [ČT]
with proposals to introduce
mandatory electronic
records of sales. As first
reported by Echo24.cz, the
next morning undercover
officers from the local social
security office carried out
checks on her business.
Office head Jindřich Kohout
later freely admitted that
Fenclová’s TV appearance
led to the action. According
to Labour Minister Michaela
Marksová, the whole
incident was unnecessary
borderline-harassment, and
her ministry has no interest
in such behaviour. Sounds
nice. Wonder whether we’ll
hear the same tune after
electronic sales records are
implemented. We doubt
it. That will be legallyapproved harassment.
Tax freedom day – the
day of the year by when
the nation as a whole
has theoretically earned
enough income to pay its
taxes – falls on 5 June this
year. A record. During
the 15 years in which
economists have been
calculating this marker,
the day has never come
so early. But excessive
celebrations would be
misplaced. There’s no need
to thank the “benevolent”
state, rather gratitude
goes to the growing
economy. After all, this
day is calculated with the
annual proportion of public
expenditures set against
GDP. And expenditures
certainly have not fallen.
joke
ad ve r ti s in g A151007192
Martin
Čaban
What is certain is Sobotka’s
adeptness in managing his governing party’s first ministerial
switch. A certain advantage is
afforded him in that Chládek is
not departing due to political or
policy-related failings. Rather,
he is by all accounts leaving
after treating his subordinates with overbearing disdain.
Sobotka could have ousted
Chládek for many of his curious policy ideas, starting with
providing primary schoolers
with tablets and culminating in
affixing chips to pupils. But that
would mean accepting some
blame for the failure – indeed,
Chládek’s defence of even his
most outrageous ideas was that
the policies came from the PM’s
own Social Democrats.
PM Bohuslav Sobotka
wants his eight Social
Democratic ministers to be
more active. Ministry heads,
says Sobotka, should be
busybodies, not slackers:
“An alarm clock is called
for. I want ministers to step
on the gas,” said Sobotka
following a meeting of his
party’s central committee.
The PM plans one-on-one
pep-talks with individual
ministers to troubleshoot
weak spots. Trade and
Industry Minister Jan
Mládek has already been
put through the mill.
Nothing against all this,
in theory. In practice, of
course, one must be careful
not to over-exert oneself...

Photo: ČTK
Appointing a woman
to head the education
ministry represents
a double-win for
Bohuslav Sobotka
8/9
cover story
Gold vaults, big and small
The amount of gold in tonnes held by selected countries
(percentage of gold in the overall foreign currency and gold reserves)
USA
8133.5
(74.1)
Germany
3383.4
(67.8)
Italy
2451.8
(66.9)
France
2435.4
(64.8)
Russia
1238.3
(13.3)
China
1054.1
(1.1)
Austria
280.0
(45.1)
Poland
102.9
(4.0)
Brasil
67.2
(0.7)
Slovakia
31.7
(31.7)
Czech Republic
10.4
(0.8)
Hungary
3.1
(0.3)
Canada
3.0
(0.1)
Trinidad and Tobago
1.9
(0.6)
Source World Gold Council, May 2015
Photo: Michael Tomeš
Photo: Tomáš Novák
The most active buyers
Not following
the gold brick road
Continued from page 1
By the latter part of the 1990s, the ČNB
was in possession of 70 tonnes of gold.
But over 1997 and 1998, the central
bank sold 56 tonnes. “Following an
evaluation of liquidity, security and
returns, gold no longer matched the
needs of the ČNB,” said Kateřina
Bartůšková, a spokesperson for the
central bank. The bank is to this day
still following the liquidation policy.
It held onto its remaining 14 tonnes of
gold until 2005, but since then it has
been selling hundreds of kilograms
annually. As much as 731 kilograms
was sold in 2013 and 264 kilograms
went in 2014. From January to May of
this year, another 139 kilograms was
disposed of. The current gold holdings
of the bank now amount to just 10.446
tonnes. “The year on year reduction
seen in the gold reserves held by the
bank is a consequence of the gold coin
issues which were minted from ČNB’s
stock,” confirmed Bartůšková.
The value of the gold reserves, expressed at market value, was given as
CZK 9.3bn at the beginning of this year.
Perhaps surprisingly, even though the
ČNB has essentially been denouncing
gold, it made a neat billion crowns on
its reserves of the precious metal last
ves ratio than the Czech Republic (See
the box, “Gold vaults, big and small”).
The current Czech Republic ratio is 0.8
percent. In comparison, eastern neighbour Slovakia boasts a ratio of 31.7
percent. Germany claims it holds 67.8
percent of its reserves in gold, while
10.446
tonnes of gold are
currently held by the
Czech National Bank
year: the value of the reserves given at similar values have been reported for
Italy and France. What’s more, Germany
the end of 2013 was just CZK 8.3bn.
last year announced it was pursuing
Choosing the race to the bottom the objective of having one-half of its
The World Gold Council (WGC), which total gold reserves on home soil by 2020,
monitors the gold reserves of about 100 instead of the current less than onecountries around the world, says that third. Berlin is thus retrieving almost
there are only four nations with a lower 700 tonnes of gold from deposits held
gold to foreign exchange and gold reser- in the US, UK and France. Following
the same trend, at the end of last year
the Netherlands declared that it had
brought home 123 tonnes of gold that
had been deposited in New York. The
latest country to have announced its
plans for a gold repatriation is Austria.
It is planning to send home 110 tonnes
currently sitting in London.
Over the course of 2014, central
banks worldwide purchased almost 461
tonnes of gold, spending more than
USD 19bn. It amounted to the second
biggest one-year gold purchase volume
in the past 50 years. The most active
buyer was Russia, along with several
Asian countries. By purchasing gold,
central banks are typically following
a policy of diversifying their reserves
into several different types of asset
class. Given the rather loose monetary
policies practiced worldwide in recent
times, central banks are apprehensive
when it comes to the possible devaluation of their reserves and choose gold
as a safeguard.
The Czech Republic has maintained
its rather negative stance on gold since
the end of the 1990s. The country must
therefore make do with a “weakling”
gold value to GDP ratio. Presently, it
stands at 0.26 percent. In contrast, the
EU-wide average is 4.6 percent, according to WGC data. “I quite understand
the position of the central bank. We
generally lack experts able to opportunely buy and sell gold. Being late in the
game usually means making a conside-
Bar by bar.
A total of 731 kilograms of gold were shipped from the ČNB
vaults in 2013, while 264 kilograms went last year
and 139 kilograms were liquidated from January to May of this year
rable loss and our history shows that
we are prone to choosing the wrong
moments,” remarked Michal Mejstřík,
a Professor of Economics at Charles
University in Prague. “Historically, we
have chosen to sell our gold. It would be
highly subjective to evaluate whether
the state should own more gold,” he
added.
Not all economists are, however, as
uncritical of the policy as the professor. “I am of the opinion that the ČNB
should be holding much more gold than
it does at the moment. Apart from other
reasons, gold reserves held by a central
bank lend credibility to the currency it
issues,” said Lukáš Kovanda, Chief Economist at Roklen Financial Group.
Weaponising gold
On 1 June, an ounce of gold commanded a price of USD 1,189. In 2001, the
same amount could be bought for only
USD 250. Gold hit its record heights
of around USD 2,000 in 2011. It is the
price fluctuations together with the
high costs of storage and low liquidity
that became the key factors in the ČNB
shying away from gold. “Today, the ČNB
board includes people who have made it
known that they see little to no benefit
in holding gold. Yes, they are correct
in saying that there is no interest paid
on gold, but who says that foreign exchange and gold reserves are there to
bear interest?” observed Roman Pilíšek,
Chief Economist at the Zlaté rezervy
(Largest gold purchases in 2014: by country, in tonnes)
Russia
173.0
Kazakhstan
48.0
Iraq
48.0
Turkey
9.3
0
50
100
150
Source WGC
Only three countries
out of a monitored
one hundred hold
a smaller proportion
of gold in their
foreign exchange and
gold reserves than
the Czech Republic
[Gold Reserves] gold investment firm.
Pilíšek is one of those who talk of gold
purchases or repatriations as “monetary arming”. The gold value to GDP ratio
is 2.7 percent in the US and 2.7 percent
in Russia – and if China was to achieve
the same percentage it would require
4,200 tonnes of the bullion.
In November 2011, an analytical team
at the Belgian KBC Group, the parent
banking group of Czech bank ČSOB,
described gold as a low-value and volatile investment asset suitable only
as a fallback security in times of war,
revolution or a collapse of the monetary
Shunning gold
14
13
(Gold in tonnes owned by the Czech National Bank
at the start of specified years)
13.53
13.62
13.34
12.91
13.46
13.13
12.7
12.45
12
11.58
11
10.85
10.446
10
2005
May 2015
Source WGC, ČNB
system. It offered no protection from
inflation and suffered from a very low
economic value, they said. There is, it
seems, no shortage of extreme views
on gold among prominent economists.
For instance, it is easy enough to locate
insistent statements in which it is said
that purchasing gold is the only solution
to the current economic situation marked by the limitless printing of money
to prop up budgets.
It is only too clear that there is certainly more than one way to view gold. Its
dollar price does suffer from considerable fluctuations. Yet it is much more
stable when compared to the crude oil
price. And when the ČNB was selling
its gold in 1998, it could perhaps have
been considered more expedient to
sell it in order to obtain funds for the
purchase of German sovereign bonds.
But viewed through today’s lens of hindsight such a decision would not have
paid off. When converted to the current
value of gold, and given the current
USD exchange rate, the disposal of the
gold has cost the Czech central bank
CZK 37.4bn – but that is a sum which
German state bonds have certainly not
delivered.
10/11
face to face
Milan Teplý:
Milan Teplý (66)
Born in Prague. Graduated from
the Prague Faculty of Food Technology (milk and fats department)
at the University of Chemistry and
Technology, Prague (UCT) in 1972.
Subsequently joined milk producer Laktos Praha as a technician.
Later worked for the State Quality
Control Authority (today SZPI). In
1976 joined Jihočeské mlékárny
(since 2002 Madeta a. s.) registered in České Budějovice. Took
over as CEO in June 1990.
We’re feeling
the squeeze
Dušan Kütner
The EU is currently experiencing a surplus of unsold dairy products, while
wholesale prices continue to fall. Has
this also affected Madeta?
Yes. The situation is worsening. But
our agriculture minister [Marian Jurečka] remains in a state of disbelief.
The situation is deteriorating rapidly.
Indeed, products have begun to be sold
at wholesale prices, meaning CZK 6.50
for a litre of raw milk.
Are these problems the result of the
abolition of long-running milk production quotas by the EU at the end of
April?
No, they are the result of a severe
over-flooding of the market. Firstly,
customers aren’t buying enough – and
that is occurring across Europe. Secon-
dly, the doors to Russia are now closed
for exporters, creating an over-supply
of both raw milk and consequently dairy products. Now dried milk can be sold
on the market below cost, but even so,
no-one is buying. Perhaps those quotas
are beginning to play a role in this, but
that was to be expected. Also to blame
is an over-estimation of the export potential of the Chinese market. This fall
should have been caught at the outset.
I don’t mean that as an insult, but the
minister [Jurečka] should have started
taking action last October and November. Measures should have included,
for example, the state buying up dried
milk surpluses for the Administration
of State Material Reserves (SSHR).
In terms of Russia, you previously estimated the losses to the dairy industry associated with the Russian import ban [on selected EU groceries] at
around CZK 150m. Has this figure proven correct?
It will reach that level. But there
are people who don’t believe it. Tomáš
Prouza, the government’s State Secretary for European Affairs, declared
that Madeta has incurred no losses
and sees no possible reason why we
might need any kind of assistance.
And yet we have signed numerous
delivery contracts, and gained all the
necessary certifications demanded by
the Russian side. We carried out all
cooling and logistics requests asked
for by the Russians. And just as this
began to function, a political decision
put an end to these exports. And now
consider that these contracts are still
valid. The purchaser could take us to
court over non-delivery, because they,
too, are a private company. So there is
simply no discussion about whether we
incurred losses. They even turned back
our trucks from the border.
Have you requested compensation
[from the Russian side] for this?
Of course. The fact that we have
incurred losses is certain. Presently,
we can prove this has reached more
than CZK 100m.
ands the like; they know where to go,
which corridor of power to walk down,
which person to sit down for a coffee
with, or for a beer, or for dinner, and
so forth...
Is Madeta able to abuse its dominant
market position?
Probably not to the degree that the
large [supermarket] chains do. If someone supplies seventy or eighty types of
dairy products, then they carry a certain weight. But with regards to Madeta
acting in such a way as to punish nonpreferential treatment by the chains,
then the answer is no. I would chiefly
recommend that oversight bodies keep
an eye on the relationships between
the chains and their suppliers from the
point of view of finance, trade, veterinary, and hygiene aspects, and in such
a manner that the chains are forced to
treat their suppliers the way that they
are forced to, for example, in Germany.
That would be more than enough.
Five years ago, Madeta planned to reduce the number of its plants from six
to three within four years. But you still
have five right now...
This year, we will shift part of our
production from Řípec to Planá nad
Lužnicí, where a new production warehouse is being built. This facility will
be ready by the end of the year. After
that, we will turn to our plants in Český
Krumlov, Jindřichův Hradec and Pelhřimov – within 18-24 months, our plan
envisages these will also shift to Planá.
After that time, we will only produce
via three plants.
Why the delay?
Well, the best laid plans... It is all
about money. Add to that, costs have
gone up significantly. Last week, I learned on television that a new state-ofthe-art production line will soon be
opening in Lipánek. Building such a facility used to cost 8-10 million crowns.
Now that figure is 80 million. I would
like to undertake our relocations as
soon as possible, but I don’t want to
be installing old machinery in Planá,
and we don’t yet have the money for
new machinery. So this could mean
the plans are put on hold for some time
yet. But I would prefer that our move
to Planá is fully completed by the end
of next year.
Photo: Michael Tomeš
I
n recent months, the
Czech dairy industry
has gone from crisis
to crisis. But the head
of South Bohemiabased Madeta, the
country’s largest dairy
products company,
sees a silver lining:
“Czechs have acted
patriotically in their
shopping choices. But
they were also assisted
by a dramatic fall in
the quality of many
imported groceries,”
says Milan Teplý
How much will such moving and tapering related to the three plants cost?
Three hundred million crowns. But
this will open up new possibilities for
Madeta. Of course, our dairy farm in
Řípec is wonderful. I myself completed my university dissertation there
years ago.
But the reconstruction of the castle
and chateaux [meaning the older facilities there –Ed.] is always an expensive
proposition. Systems must be arranged so that all energies are expended
above the surface. The ideal is a quick
panel-type construction with easily installable and maintainable machinery.
And that is also the case from a communications point of view. In older plants,
the sites are full of old corridors and
stairways.
The European Commission recently
settled a prolonged battle to forbid the
use of the term “butter spread” [Pomazánkové máslo] over the fact that
these spreads contain cheese and not
butter. Since renaming to simply “Pomazánkové”, have you noticed any decline in sales?
Oversight bodies should keep an eye on the relationships
between the chains and their suppliers from the point
of view of finance, trade, veterinary, and hygiene aspects,
so that the chains are forced to treat their suppliers the
way that they are forced to, for example, in Germany.
That would be more than enough
I must say this enraged me. But people continue to purchase the product.
Most haven’t been to Brussels and take
little interest in such matters. I was there
from the outset. Not only bans enrage
a person. The appeal too [at The General
Court of the European Union (EGC).
–Ed.] did. We were so benevolent that
when the appeal was being heard, noone from the Czech side came to plead
our case. [Our] European MPs were too
busy. They beat us over the heads with
baseball bats and then we even cower
and thank them for it. We would be startled to see how some other country would
have fought in such a case.
Are plans to enter the Chinese market
proving successful?
Not at all. I think we must have jinxed
this endeavour, or I don’t know... Even
Andrej Babiš’s Agrofert is failing to
gain a foothold.
This may be speculation, but they
may have overdone it a little with their
dried milk imports [following the 2008
tainted Chinese milk scandal –Ed.]. But
we are, naturally, continuing efforts to
break in.
as Russia, Saudi Arabia, and China. Is
this a good idea?
I consider it a very smart move. Previously, embassies were staffed with
“Unitary enterprises” [Soviet-era government corporations -Ed.], whom
they essentially domesticated. And it
was later shown that abolishing these
kinds of posts was a mistake. I, too, was
among those arguing that private companies will battle into foreign markets
by themselves, without any state assistance. People with the right language
The Czech foreign and agriculture mi- skills could be found, too. But people
nistries would like to have five “agri- whose job it is to do this don’t need
diplomats” in place in countries such to waste time looking for city maps
Seven years ago, the Czech government
decided to increase its support for domestic food producers via quality certification labels such as Klasa, Český
výrobek [Czech product], Regionální
potravina (Regional food) and also accompanying marketing campaigns. Has
this caused greater public interest?
Yes. I was a major critic of such
efforts, believing them to be mere
pointless flags printed onto products.
But I was wrong. They have certainly
helped. I must say that ultimately many
Czechs acted patriotically in their shopping choices. But they have also been
assisted by the fact that the quality of
many imported groceries has dramatically fallen.
You have resisted past efforts by firms
to buy up Madeta. Are foreign investors expressing any interest in acquiring the company?
No. There was some past interest, but
we profile ourselves as a Czech company.
And there is no need for it to be otherwise. If there were serious discussions to
that effect, then I would walk out of the
door. I have spent a good part of my life
at Madeta. Without being sentimental,
I have no intention of passing over the
reins to a foreign owner.
You aren’t planning on retiring yet?
I am. After all, I am 66. I can hardly
make it here anymore!
Who will take charge at Madeta after
you?
I have no idea. I am looking for someone. Any ideas?
So you are seeking someone from the
outside?
No. The boys here are smart – many
very much so. I don’t know which of
them it will be, but it is certainly one
of them.
12/13
photostory
In the thick
of the IS fight
 Chaos. Kurdish fighters belong to the Syrian leftist YPJ Women’s
Protection Units, formed in 2012 to fight against IS. Kurdish territory
in Syria, where we worked together on the front line, exists in a state
of flux. The region has been taken over by the YPG militia, mirroring
the better-known PKK Kurdistan Workers’ Party in Iraq. Portraits of
imprisoned Kurdish leader Abdullah Öcalan hang everywhere, including
around broken streetlights. Red stars adorn pictures of martyred
fighters. But the YPG is also cooperating with the regime of Bashar
al-Assad, and is battling against other Kurdish factions of the PDK
(Kurdistan Democratic Party), supported by Masoud Barzani, president
of Iraqi Kurdistan.
In contact with IS.
The bombed-out
homes in the Syrian
town of Sari Kani
are on the frontline
with Islamic State,
whose de facto
capital city AlRaqqah lies some
120 km away
Photos: Lenka Klicperová, Jarmila Štuková
 Despair. Thirty-year-old Chalida wipes away tears: “It would be better for
them to kill us than to have to live like this.” Along with four other Yazidis,
she is forced to survive in the first floor of an unfinished building in Erbil, Iraq.
The women escaped from Sinjar; their husbands have killed many IS fighters.
Thousands of refugees live in similar conditions
T
he civil wars in Syria and Iraq are into
their fifth years. The number of refugees
escaping the conflict is up, as is the
growing devastation and suffering in both
war-ravaged countries. There is no end in
sight. Despite the fact that Islamic State (IS)
is estimated to have only around 30,000
members, a plan to defeat this group remains
elusive. Indeed, it appears that IS is prevailing
at present. We travelled to both countries to
document the lives of those who have lost their
homes through war, and those who patrol the
Kurdish line day and night. Thanks to the efforts
of the Archa Help project (archapomoci.cz) you,
too, can discover ways of easing the burden
faced by many in this part of the world
 Cost-cutting.
Kawergosk refugee
camp, not far from
the Kurdish capital
of Erbil across the
border in Iraq,
houses around
2,400 mainly Syrian
families. Supplies
come courtesy of the
World Food Program.
As the war continues,
refugee numbers
swell, while rations
are cut. “At the start,
each family received
USD 30 per person
per month. Now we
have had to cut that
figure to USD 19,”
explains Mohamed
Ataomar, one of the
managers of this
camp
 Suicide attacks.
Part of the front near Mosul, which
is controlled by Iraqi communists,
is extremely dangerous. The lawless,
rugged terrain, enables the enemy
to sneak up close to the defensive
bulwark. “Most often, they attack at
night, or when there is fog. Many times
they have pushed to within 10 metres
of us. Some carry explosives, and try
to launch attacks against the camp.
A couple of days ago, we killed one
fighter,” says one soldier defending the
front, pointing to a picture on his cell
phone of a man shot through the head
authors
Lenka Klicperová,
Editor-in-chief
Lidé a Země [People and Earth],
and documentary filmmaker
Jarmila Štuková
14/15
wine & dine
society
society
RestauRant Lavande
dream revamp at House of the three Wishes
Children who face a family crisis can now take advantage of modernised
premises at Dům tří přání [House of the Three Wishes] in Prague 6.
Volunteers from Provident Financial helped plaster and paint a studio space
at the property as part of its revamp. Dům tří přání is preparing an 18 June
celebratory opening of the facility, featuring items made by children during
a creative programme. The house organisation comes to the assistance of
children and families that face a crisis situation. For instance, it can help
address threats posed to a child caused by a divorce or social problems
afflicting their family
Local larder stakes its claim
Photo: HSBC
An ambitious
new restaurant
in Smíchov is
promoting locallysourced produce
and seasonal fare
in a challenging
location close to
Palacký Bridge
Fermat engineers scoop the big HsBC award
Klára Donathová
L
a dv e r t i s i n g
A151002220
Photos: archive
salad
with marinated
meat
The Verdict
Get your subscription!
RestauRant Lavande
Lidická 2, 150 00 Prague 5
tel.: 734 332 351
www.restaurantlavande.cz
by district of Únětice, then the
restaurant has served its task
well. What seems to be lacking,
however, is a unifying concept
or a clear sense of direction. In
the long run, a theme probably
works better than a trial-and-error approach, testing out what
people like and then trying to
provide it for them. Reputations
are not built overnight and if
wholesome asparagus dishes
and homemade lemonades
don’t sell like hot cakes at first,
that’s no reason to replace them
on the menu just yet.
Monday, 15 June 2015
CZK 24/¤ 1 l www.e15.cz
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Sour milk sales
a
Ministers must wake up to
says
deteriorating dairy crisis,
Madeta boss Milan Teplý
face to face pages 10–11
Kurds battling IS
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When I set off for Lavande
a few days later for lunch, my
low expectations were not unwarranted. However, the menu
choice was more of a quandary
this time, as every dish sounded
quite tempting. Eventually the
salmon with olive tapenade and
roast potatoes won out and it
tasted exceptionally good, as if
an entirely different chef was
at the helm for this lunch than
for the dinner we had muddled
through a few days earlier.
Moreover, the dandelionlarch lemonade with homemade syrup, which I ordered
in lieu of a lunchtime aperitif,
only served to prove the restaurant’s claims to promote
locally grown, honest produce. As someone who also likes
to gambol through the woods
in springtime, collecting the
shoots of young conifers, I can
only say that Lavande’s organic
lemonade is the real thing.
Indeed, everything I observed and tasted at Lavande
smacked of a great effort to
bring something different to
Smíchov that might be worth
going back for. Even if it’s just
the homemade bread and pâté
or a 10-degree beer made by
a family brewery in the near-
Full-year subscription:
Exclusive photoreportage
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in Iraq and Syria
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Photostory pages 12–13
Every year,
hundreds of
kilograms of gold
vanish from the
Czech National
Bank’s vaults. The
precious metal
is used to make
gold coins which
are offered by the
central bank to
the public
Not followingad
the gold brick ro
vouchers with a value of CZK 1,110
all-day voucher
for wellness
and fitness club
Volcano Complex
Petra Pelantová
W
hen central banks
step forward to
explain shopping
sprees in which
of
they have spent billions
gold
dollars on boosting their
talk
reserves, they generally
the
of two things: preparing
the
national defences against
ensunext financial crisis and
equipring their reserves are
ped with enough “monetary
banks
firepower”. Most central
are,
not actually buying gold
meanwhile, at least bringing
abroad
their gold home from
they
or, at the very minimum,
levels
are maintaining existing
Czech
of their holdings. But the
which
National Bank [ČNB],
the
is charged with managing
Czech Republic’s gold reserves,
an enseems to be betting on
It has
tirely different strategy.
stocks
been liquidating its gold
for many years and continues
plan
to do so. The ČNB’s game
coins
is to use its gold to mint
for sale to the public.
Photo: Hynek Glos
avande is a welcome
addition to Smíchov’s
diverse but unpredictable restaurant scene. Its
emphasis on locally grown foods and seasonal dishes could
well find a receptive market in
a notoriously difficult locale for
restaurateurs.
The interior is airy, modern
and inviting, while the menu
is also capable of springing
a surprise or two. Fresh, local
and seasonal foods are the key
words here and on our first visit
asparagus was the order of the
evening. This most seasonal of
vegetables had been worked
into several dishes with obvious
forethought and imagination.
We began with green asparagus
with poached egg and smoked
trout, which lay somewhere
between a main dish and an
appetiser. It was well made,
classic spring food but I would
have been content with half the
portion, given that there were
heartier dishes to follow.
The asparagus risotto with Braised neck with mashed potatoes
chicken featured perfectly
done, juicy chicken breast,
probably prepared by the longer sous-vide method of cooking. The risotto, however, was
less than perfect, lacking the
requisite creamy consistency
and the anticipated Parmesan
cheese, of which I could find no
trace. There was also an issue
with the seasoning, which was
a little over-zealous. The desserts listed on the menu that
evening did not tempt us and
we left with decidedly mixed
impressions.
Photo: Provident Financial
Largest Czech horizontal boring mill manufacturer Fermat has triumphed in the
main category of the HSBC International Business Awards, International Innovation.
The contest, which is in its first year, is focused on assisting dynamic domestic
companies that aim to prosper on foreign markets. Fermat’s victory in the contest
owes much to its acquisition this year of American horizontal boring mill specialist
Lucas Precision. The US company, which built its first machine back in 1901, had
been forced to stop production in the wake of the economic crisis. Michael Hordley,
the CEO of HSBC Czech Republic, presented the business award to Fermat Financial
Director Tomáš Slavík (right, in the picture)
Continues on page 8
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16
Photo: Reuters
diversions
picture of the week
Taxi? Or tiltrotor?
A big wash of rain is sent up by a US Marine V-22 Osprey tiltrotor aircraft as it sets down near Krűen in Bavaria, Germany. Ospreys were used to ferry members of
American President Barack Obama’s staff, secret service detail, White House press corps and other personnel to Munich airport at the end of the 41st G7 summit
held in the Schloss Elmau luxury hotel. The Osprey was developed after the failure of the 1980 American hostage rescue mission in Iran. That demonstrated to the
US military a need for an aircraft that could not only take off and land vertically but could also carry combat troops at speed
invitations
film
live music
contemporary art
concert
Sculptures in customary
and surprising places
Free open-air cinema
at Žluté lázně
McFerrin and Corea
at JazzFestBrno
Andrej Dúbravský’s
On-line Camp
Australia’s The Cat
Empire in Prague
Open-air exhibition Sculpture
Line is a new project that
offers a unique opportunity to
present sculptures and objects
of art in both well-known,
and less-expected, attractive
settings in Prague. The work
of both Czech and foreign
sculptors feature. Among
highlights are Sukhi Barber’s
presentation at Václav Havel
Airport and Michal Gabriel’s
creation on the river Vltava.
Until 30 September.
Tuesday summer evenings will
offer something special to film
fans until 27 July. Open-air
cinema screenings will feature
at the Žluté lázně recreation
area on a bank of the river
Vltava in Prague’s Podolí
district. Grab a deckchair or
lounger and settle back on the
grass beach. All the movies
will start at 9pm. Entrance and
all the screenings are free.
The venerable Bobby McFerrin
and Chick Corea have won 32
Grammy awards combined in
their legendary careers. On 17
June, they will come together for the final concert of
JazzFestBrno. Their joint-performance premiere will take
place at Brno’s Hala Vodova
venue. McFerrin, a vocalist
and conductor, is best known
for Don’t Worry, Be Happy. Pianist Corea was a Miles Davis
band member in the 1960s.
On-line Camp, a solo exhibition by exciting young
Slovak painting talent Andrej
Dúbravský, 27, will feature
at Prague gallery Dvorak
Cec Contemporary until 14
July. The presented work was
inspired by the participation
of the artist in this year’s Volta
NY art fair in New York, the
mecca of contemporary art,
and his wanderings around
Mexico. Realism and abstract
expressionism combine.
Ska and jazz outfit The Cat
Empire, one of Australia’s
most successful bands of
recent times, will fulfill the
dreams of their legions of
local fans when they perform
live for the first time in the
Czech Republic. The Melbourne sextet offer a catchy and
witty blend of music that also
includes heavy Latin influences and reggae. Lucerna Music
Bar, Prague, on 17 June.
Photos: archive
exhibition